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Singapore’s Market for the Week: Ascendas Real Estate Investment Trust Leads the Market Lower

Ascendas Real Estate Investment Trust (SGX: A17U), which focus on business parks and industrial properties, slumped around 5% for the week to close at S$2.24. Meanwhile, the the Straits Times Index (SGX: ^STI), Singapore’s market barometer, slipped by 1.2% to 3,305 points during the same period.

In all, 23 of the 30 STI constituents ended the week in the red, while three were flat. The rest closed the week with gains. The biggest winner in the index was commodities trader Noble Group Limited (SGX: N21), as the commodity firm increased by 2.5% to finish the week at S$1.425.

Two weeks back, talks were rife about possible mergers between four subsidiaries – Ascendas Pte Ltd, Jurong International Holdings Pte Ltd, Surbana International Consultants Holdings Pte Ltd, and Singbridge Group – which are under JTC Corporation and Temasek Holdings. The union will form a combined integrated platform for sustainable urban development to tap on the growth of urbanisation in Asia and emerging markets. The Manager of Ascendas Real Estate Investment Trust is a wholly-owned subsidiary of Ascendas Pte Ltd, but the REIT has made it clear that it is “not a part of the proposed transaction[s]” between JTC Corporation and Temasek.

Besides the STI, there are actually a number of other share market indexes in Singapore. One of them is the FTSE ST Real Estate Investment Trusts Index, which represents the real estate investment trusts (REITs) listed in Singapore, declined by 2.7% to 753 points. Ascendas Real Estate Investment Trust is also part of the index. Most of the REITs performed poorly for the week, with CapitaCommercial Trust (SGX: C61U) decreasing approximately 7% to S$1.58.

The United States Federal Reserve said this week that its bond-buying program will end next month but it will probably not raise interest rates till 2015 at the earliest. If interest rates do rise, debt will become more expensive for businesses. As such, REITs, which are generally heavily-leveraged, will have to fork out more cash to service their loans, hence potentially affecting distributions to unit-holders.

The STI is currently valued at 13.8 times its historical earnings while the FTSE ST REIT Index is trading at 1.01 times its book value.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.